C.R. Bard Finds Cost-Cutting Moves can be Costly

Saving money can be quite expensive.

Just how expensive depends on the magnitude of the savings and the size of the company. Large corporations, for example, easily can incur multi-million-dollar tabs when trying to reduce expenses and position themselves for future growth. Most of that expense, though, comes from severance packages, since corporate cost-cutting measures usually involve job cuts.

A brief look at the latest regulatory filing from C.R. Bard Inc. epitomizes the irony of spending money to save money. The Murray Hill, N.J.-based medical device manufacturer said it expects to incur a $20 million pretax charge against fourth-quarter earnings as part of a plan to reduce costs. The firm did not divulge details of the cost-reduction plan, saying on in the filing that it “includes the realignment of certain manufacturing, sales and marketing, and administrative functions” as well as the “elimination of certain positions” worldwide. C.R. Bard expects to complete its restructuring by the end of next year.

Most of the $20 million pretax charge will be used to cover severance expenses. The company said in a Dec. 16 filing with the U.S. Securities and Exchange Commission (SEC) that it entered into an agreement with Goldman Sachs & Co. to repurchase $750 million in stock.

Several days before its first SEC filing, C.R. Bard executives provided industry analysts with estimates for its financial performance next year. Bigwigs said they expect net sales growth to range between 5 percent and 8 percent, with earnings per share swelling 14 percent compared with its 2010 forecasts. The company’s full-year 2010 EPS guidance remained unchanged and is expected to range between $5.50 and $5.54 per share, excluding the impact of certain items.

C.R. Bard manufactures surgical products including catheters, guide wires, stents, filters and devices to treat cancer and other diseases. In May, the firm acquired SenoRx Inc. for $200 million in cash in an effort to boost its diversity of breast biopsy products. Based in Irvine, Calif., SenoRx marketed the EnCor stereotactic-guided and MRI-guided breast biopsy systems as well as the Gel Mark line of breast tissue markers and the Contura balloon catheter to treat breast cancer. SenoRx became part of Bard’s Peripheral Vascular division when the merger was completed in the third quarter.